What happened to the strong buyer’s market, where bargain hunters could scoop up great deals at ridiculously low prices?
Many buyers have waited to “find the bottom of the market”. Now’s the time to get off the fence; the market’s turning and is headed into seller’s market territory (at least in some areas and price points).
One of the best ways to understand the real estate market conditions is to track the absorption rate or months of inventory. Approximately 6 months of inventory is a balanced market. Five or less is a seller’s market and seven or more months is a buyer’s market.
Here’s a view of what’s happening among single family homes in Santa Clara County (about 60% of the county is represented by the City of San Jose):
Inventory is down, sales volume is up, the median sales price is up (it had been holding steady at appx $450,000 for the last three months – this is the first uptick we’ve seen this year). The days on market are holding steady at close to 100 and the percent of list price is hovering at around 97%, where it’s been throughout 2009. No real signs of slippage here, but there are signs that inventory is being absorbed.
Once inventory starts declining, there will be pressure on prices to go up. (It is supply and demand driven, of course.)
On the flip side, the foreclosure moratorium will be ending shortly and there may be an increase of inventory. If that happens, it will stem the tide and it will revert into buyer territory. Until and unless that happens, though, it looks like Silicon Valley real estate is generally turning back to the seller’s favor after three long, difficult years of buyer gains.